Legal Sports Betting Scores Big With Taxpayers

The WasteWatcher

July 8, 2019 — CAGW Staff

The year 2019 has been a landmark year for sports betting, with one in four Americans living in a state where the practice is legal. Since the 2018 Supreme Court ruling overturning the federal prohibition, states are now permitted to pass sports betting legislation. After the decision, 17 states have fully embraced the ruling, while others have rejected or delayed legislation. Even among the states that have legalized the practice, differences exist in each state’s tax and regulatory regime. While this fragmented market may create headaches for state officials, it will ultimately bring down the costs and taxes levied on consumers.

The variation in legality and taxation among states encourages each to pursue sports betting laws that are more consumer friendly than those of its neighbors. The natural competition will drive the legalization of sports betting and support related industries. When states are worried an individual may hop on the interstate to bet elsewhere, they are further incentivized to ease state laws to grow their in-state market. In New Jersey, for example, the domestic market grew so large that gamblers wagered more there in May 2019 than they did in Nevada that same month. The legal distinctions across states is critical, as competition can level tax rates which currently range from 13 percent to upwards of 50 percent. Each state that legalizes sports betting represents a competitor to others already in the market. Subsequently, there is an incentive for newcomers to impose light-touch taxes and encourage market leaders to reduce their existing tax rates.

While states with legal sports betting are thriving, states that keep the practice illegal share a predictable pattern where consumers either continue to utilize illegal means or travel to states that will happily collect their tax revenue. This occurs in Louisiana, where a legalization effort passed the state Senate but met its demise in the House. According to Louisiana State Sen. Danny Martiny (R), the failure of this bill won’t stop many Louisianans who already circumvent the law through the use off-shore betting sites, bookies, or casinos in neighboring Mississippi. Sen. Martiny says he favors legitimizing sports betting in the hopes that subsequent revenue can be directed towards early childhood education.

Holistically, the roadmap ahead is winding but promising. States that legalize sports betting are no longer early adopters and can learn from the mistakes and successes of others. This means incremental, yet definite progress is being observed in most legislatures, even through unconventional means. In Maine, a hesitant Gov. Janet Mills (D-Maine) is entering a special legislative session to work on the state’s bill. In California, frustrated legislators and advocates are pivoting to propose a ballot measure after failing to pass bills in the legislature. By the numbers, the trend is clear: States considered 18 sports betting bills in 2017 and 54 in 2018.

With each state that passes legalization legislation, the pressure grows on those who do not. It is difficult for legislatures to ignore the potential revenue combined with the clear popular support for sports betting. Since 2011, most Americans believe that the government should allow the practice. States that legalize sports betting are recognizing its benefits and are being rewarded for doing so.